Liquidation is a scary word when it comes to your personal assets, so it’s little wonder that so many people shy away from Chapter 7 bankruptcy despite how beneficial it can be. After all, this so-called liquidation form of bankruptcy can sometimes necessitate the sale of your personal property in order to repay creditors.
People have misinterpreted the potential of asset liquidation as a rule that requires someone to sell or spend everything they own in exchange for the discharge of their unsecured debts. There are countless rumors about how liquidation bankruptcy works that likely contribute to people’s reticence to file.
One of the more common myths is the belief that those filing for bankruptcy will have to sell their home or get rid of their car due to the bankruptcy proceedings. However, there are both federal and state bankruptcy exemptions available in Kentucky that can help protect some of your personal property in a Chapter 7 bankruptcy filing. Do any of those exemptions apply to your vehicle?
Both state and federal exemptions include equity in vehicles
Kentucky recognizes that a vehicle is often a necessity if you want to continue working and earning a wage. You may also need a vehicle even if you don’t work to make it to medical appointments and other obligations.
Thankfully, you can exempt up to $2,500 worth of vehicle value and equipment, like spare tires, from claims by creditors during bankruptcy under Kentucky exemptions. If you have a vehicle with accrued equity substantially higher than that, the courts may require you to refinance the vehicle or use it as collateral for a loan to repay your creditors.
There’s also a federal vehicle exemption of $4,000 in equity. It is worth noting that you cannot pick the federal exemption for some areas of your bankruptcy and the state exemptions for other areas. You must use the same kind of exemption for all property that you hope to protect. Depending on all of the assets you hold and the debts you need to discharge, you will have to select the right exemptions for your needs.
Selecting the right kind of exemption will help maximize the benefits of bankruptcy. Getting help with evaluating your situation, your assets and your options can lead to better decisions before and during bankruptcy.